Tax underpayment or nonpayment might be interpreted as tax evasion. Due to the fact that some people frequently make mistakes when filing their tax returns, our nation’s tax structure is very complicated and lengthy. While these types of errors are permitted by law, intentionally concealing income or assets from the tax authority is known as tax evasion and is a crime. Both unlawful underpayment and illegal nonpayment of taxes are included. The primary goal is to examine the definitions of tax avoidance and evasion.
- to research the factors that contribute to tax avoidance.
- analyse various evasion prevention strategies.
- to examine the effects of tax avoidance.
- to find out what effect it has on India’s economy.
Tax evasion is an illegal practise in which people fail to pay their fair share of taxes or pay them insufficiently.A person makes an effort to keep the authorities in the dark about his exact earnings at any given time and hides his true financial affairs from them. Black money or tax evasion needs were felt throughout the 2008 financial crisis.
For different acts of omission, intentional negligence, and purposeful evasion of taxes owed in any financial year, the Income Tax Act in India specifies penalties for the taxpayers. For corporations, it also specifies fines for failing to meet the necessary documentation and compliance standards during a fiscal year. Some instances and pertinent parts of the listed penalties are provided below:
- If the taxpayer attempts to lower the tax due by lowering the reportable income, Section 270A of the Act holds the taxpayer accountable for a penalty. The fine may be as high as 200% of the amount of tax due on the undeclared income.
- If a taxpayer does not maintain their book of accounts in accordance with Section 44AA’s requirements, they are subject to a Rs. 25000 fine under Section 271A.
- Sections 220 (1) and 221 (1) of the Income Tax Act allow an assessing officer to impose a penalty on a taxpayer for failing to pay taxes on time.
Tax avoidance and tax evasion
Tax avoidance is allowed; however, tax evasion is criminal according to the Income Tax Act. By investing in the different government-run programmes, our government offers us numerous possibilities to lower our tax obligations. The government also offers loans for things like homes and education, and by taking out these loans, we can avoid paying taxes on the amount borrowed.
Recently Development
The Income Tax Appellate Tribunal (ITAT) reduced Hasan’s tax liability in February 2016 from about $3 billion to Rs. 34,000 billion. Hasan’s income and consequent tax liabilities cannot be supported by the IT department. The assessing officer has received notice of the reassessment. As a result, Hasan was granted bail (on the 14th try), despite the fact that the ED is still unable to support the accusations made against him in the charge sheet. Thus, Hasan’s attorney asserted that his client had suffered as a result of being wrongly accused in the case.
Tax avoidance case Law in India:
Hasan Ali’s case
Hasan Ali Khan, an alleged money launderer and hawala trader, He is accused of concealing large sums of money in Swiss accounts, escaping around $910 billion in taxes from Indian tax authorities.
R.K. Garg v. Union of India
In this instance, the government’s decision to disclose that it had black money in its possession was questioned. In this instance, it was argued that this action was taken just to prevent tax evasion offences from developing into white collar crimes and not to promote them, as doing so would only serve to recover all the money that had been stolen and hidden by the victims.
This was only a disclosure effort for all the money that criminals had wrongfully obtained through tax avoidance. Since the Indian government lacks a comprehensive set of functional laws, this was later seen as a wise move because it ultimately aids in stopping the kind of actions in question.
The McDowell Case:
The issue of territoriality under Indian tax law came up in both of these instances, and the ratios provided in each were completely at odds with one another. The Supreme Court ruled that India lacks jurisdiction in these cases involving tax evasion since there is a territoriality issue, and because the evasion occurred outside of Indian territory, the Indian tax officials are unable to exercise their jurisdiction.
